Consumer Title Resource | Since 2009!

Watch Out For Title Problems From Dealers Going Out Of Business

When you purchase a vehicle from a dealership, you expect to receive the title and lien release, which proves ownership and allows you to register the car. However, what happens if the dealership goes out of business before you receive these essential documents? Two potential problems could arise – your vehicle’s title and lien release. Let’s discuss what you need to know if your dealer goes out of business.

Recent news about the popular retailer Carvana has brought this topic to the forefront. Carvana is currently experiencing serious financial problems, reporting a loss of $1 billion in the fourth quarter of 2022. While they may restructure and survive, losing a billion dollars and 90% of their stock price is a significant setback. So, what should you watch out for if you purchase a vehicle from Carvana or any dealership that may be at risk of going out of business or losing their license? And what happens if you haven’t received your title yet? 

Tips to prevent used car title problems with dealerships

One potential problem that could arise if your dealer goes out of business is that you may never receive your title. When you buy a vehicle, you need the title to prove ownership, but obtaining ownership can be difficult if the dealer is no longer in business. While most states have licensing laws that require dealers to post bonds to help customers get a title, it can still be a big mess to sort out.

To avoid this situation, we recommend asking the dealer to show you a copy of the title before you give them any money. This is important whether you are buying a new or used car, as it can help you avoid potential issues down the line. However, this can be tricky if the dealer sells vehicles on a floor plan, which means they have a line of credit from an auction, bank, or finance company to buy the vehicles. In this case, the bank or auction may hold the title until the dealer pays off the loan. If the dealer sells the vehicle before paying off the loan, they won’t have the title to give you, and you won’t be able to put it in your name.

Additionally, even if the dealer has the title, it can still get lost or damaged. This is why it is crucial to take every step you can to protect yourself when buying a car, especially from a dealer that may be at risk of going out of business or losing their license. By being proactive and doing your due diligence, you can avoid potential headaches and ensure a smooth vehicle ownership experience.

If you’re planning to buy a car from a dealer, especially one with some risk of not being around in the future, we highly recommend asking to see the title. They don’t have to give it to you, and they can cover up the owner’s name, but if they have the title in their hands, it can give you a lot more peace of mind. Knowing that you won’t be stuck without a title is crucial, especially if the dealer goes out of business.

What to do if your dealer went out of business

But what if you’ve already purchased a vehicle and currently have title problems? In that case, you need to act quickly. Send notices to the dealer, the titling authority, and their licensing authority immediately to ensure you are not lost in the shuffle. Remember, the early bird gets the worm. If the dealer has titles they need to pay off from a floor plan because they’re short on cash, being persistent can help ensure they pay off yours first.

You don’t want to be the person whose title processing is last because it can lead to problems down the line. Your registration could run out, your temporary tag could expire, and you could get pulled over, have your car towed, and be out of luck. Being at the front of the line, not the back, is essential.

Many dealers may be running into financial problems, not just Carvana. But any dealer in financial trouble could pose a risk for buyers when it comes to obtaining the title. You don’t want to be the person who pays good money or owes money to a bank and doesn’t get a title. If you run into title problems, you can protect yourself and ensure a smooth vehicle ownership experience by being proactive and taking action.

In conclusion, you must look out for title problems when purchasing a vehicle from any dealer. Unfortunately, it can happen anywhere, even with reputable dealers. If the dealer loses the title before putting it in your name, you could be left hanging for a long time.

At our company, we handle a lot of titles for auctions and dealers, and we’ve seen situations where the dealer bought a car from an auction, had the title in their briefcase in their car, and the briefcase got lost or stolen. In those cases, getting the title back can be difficult, and the dealer cannot apply for a duplicate title, contrary to popular belief.

To protect yourself from potential title problems, make sure to take the necessary steps when purchasing a used car, such as asking to see the title and ensuring that the dealer is reputable. Stay informed, and don’t hesitate to contact us if you have any questions or concerns about title issues.

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